PGL asks: Do All 222 of These Economists Think the Multiplier for Changes in Government Spending is Negative?
Lifted from Econospeak, PGL speaks out:
Do All 222 of These Economists Think the Multiplier for Changes in Government Spending is Negative?
John Boehner uses Twitter to claim that economists think reductions in government spending will lead to an economic recovery. He has cited this letter signed by 222 economists as the basis for his absurd claim. Let’s just say this is an opportunity for each of the 222 economists to either distance himself from Congressman Boehner’s absurd remark or to explain why they think the multiplier is negative.
Posted by ProGrowthLiberal at 2:10 PM
The colleges that grants these economists their degrees should ask them to return it since it is obvious they have learned nothing. Demand drives an economy. Nothing else does. It doesn’t matter who is spending the money as long as the money get spent. The solution for the long term debt is simple. Its call a tax increase and it needs to be only on the super rich to avoid lowering demand.
Simple. Giovernment raises spending, suddenly by 5%. Oil imports go up 20%, just after the consumer had managed to get oiol imports down by 30%. The economy realizes that Congress is making the energy shortage much worse. The economy goes into a double dip.
So, when Congress thinks we suffer a General Glut, that is we have way too much oil sitting around, but the economy disagrees and claims that we have a severe oil shortage, then yes, that conflict results in a double dip.
Precisely what my numbers tell me, compare oil imports with stimulus spending, compute the differential (beta). Multipliers are starting at about .5-.8, and as each stimulus comes down the line, the oil bill goes up 30% faster than the stimulus. At some point the economy has to contract again so as to allow Congress access to the oil.
This multiplication factor is dependent upon the sources and uses of government spending. May’s downswing reflects the tail-end of last year’s fiscal stimulus. With that demarkation, it is easy to see that last year’s fiscal spending was very stimulating to the economy.
So then, how much should a new stimulus be, and how do you make sure it does not go to things such as funding underfunded state pensions, which has little stimulative effects. The last stimulus if you ask me was totally misdirected. The fact that the military got a nickel in the last stimulus is just mind blowing.
Do All The Bears Think The Multiplier For Changes in Government Spending Has To Be Less Than 0 For a Decrease In In Government Spending To Cause A Net Increase In Total Output?
LOL….pgl yells. I suppose the answer is only when capital letters crowd out other letters. flow5 has more nuance.
Don’t forget opportunity costs as well. Some students get that far at puclic high schools. For every $1 billion in Treasury securities we auction off we starve $1 billion from corporate bond/equity/structured finance markets.
And the only reason the stimulus has not gotten us down to 7% unemployment is because of what we spent it on – the Congressional/Senate Democrats’ give aways to the banking industry. If instead we built European high-speed train routes, say from the underserved market from Duluth, Minnesota to Toledo, Ohio we would unlock projects with multipliers in excess of 10!
I hear the wind farm project off the coast of the Kennedy’s backyard has a high multiplier too. But in the end of the day NIMBY is the law of the land. So we will get low multiplier effects like the ACORN supported give away to the greedy rich owners of the New Jersey Nets of the ABA.
“The colleges that grants these economists their degrees should ask them to return it since it is obvious they have learned nothing. Demand drives an economy.”
And what drives demand?
It’s remarkable how unfamiliar the list of signers is. Even that usually reliable source of bad ideas — the University of Chicago — seems to have only four guys willing to sign onto this thing. I only see four names that I recognize. Eugene Fama (senile? At any rate a consistent modern supporter of neo-Hooverism.), Phil “nation of whiners” Gramm (card carrying fool who managed to get fired by McCain for excessive stupidity), Douglas Holtz-Eakin (only one of the four with a possibly functioning brain. But the part of the letter about the failure of the stimulus seems to contradict Holtz-Eakin’s public statements) and Arthur Laffer (stark raving nuts).
There may be folks on the list who can read a wristwatch without a crib sheet, but they are going to have to put together a lot more persuasive argument than this piece of nonsense if they hope for any credibility beyond the wingnuts.
“And what drives demand?”
An income! IOW …………..a job.
People without jobs will not buy anything beyond subsistence level. Businesses do not spring up in areas where people have no money to spend on anything. Lowering taxes on a business will not help because they are not firing people because their taxes are too high, they are firing people because not enough people are spending money on whatever it is they produce. This is why DIRECT job creation will eventually have to be done. Businesses will not hire unless customers are increasing. Who can create a customer out of whole cloth? Only the govt through direct job creation or direct income subsidies.
Someone needs to ask these guys if they really think the answer to a decrease in spending (that is what we are suffering from, we are not OVER spending) is a further decrease in spending? You cannot SAVE your way out of a recession.
***You cannot SAVE your way out of a recession.***
Of course we can. With a little luck, it shouldn’t take more than thirty or forty years.
I Have a friend who, like you, obsesses over oil and cars ang how people should ride the bus. He is, like me, an amature economist. I am ctually agreeing that there is a link between oil and the econom,y other than the oil volcano in the Gulf. Peak oil with $140 a barrel popped the projected economic growth bubble. That is when all the malfesance came to light,
But perhaps the solutioin to the puzzle is to tax oil and use the proceeds for stimuls at the bottom of the economy. A simply rebate shaped as the early 2008 stimulus might work best. Politically acceptable stimulus checks made out of oil taxes is the secret to success.
Got anything of value to add? Ad homs are of no value. I mean you faithfully follow all the wingnuts that post on this site.
“Of course we can. With a little luck, it shouldn’t take more than thirty or forty years.”
LOL at that one Codger.
Last time I saw PGL’s idiotic views posted here, his response too being thoroughly castigated, was claiming that Angry Bears readers were stupid, and that he wasn’t coming back. How come he doesn’t stay gone?
Not really Jay. Those people (other than Holtz-Eakin) are either buffoons or nonentities. Too difficult for you to follow? Not surprising.
peter john
on the whole i agree. but a tax increase would get spent in any case.. the government spends money. and that is demand just like demand for plastic toys is demand. i think that if we are going to increase taxes on the rich, and i think we should, if only to pay for the deficit from their last tax cut out of the money they made by growing the economy, we should raise taxes on the poor, not much, but as a show of good faith. i’d be perfectly glad to call the payroll tax a “tax” for that purpose. as long as the increase was on the order of a tenth of a percent from time to time, at need.
Holtz Eakin lost me when he started selling the social security sky is falling nonsense, with the words modified so as not to seem too entirely scare-mongering. just soberly warning of doom.
Cursed,
I lifted the post (stole). Sometimes yelling is quite appropriate, and I don’t do that well.
Marshall Auerback sent me a nice e-mail on the topic, as an op-ed…I’ll see if I can post it. He doesn’t yell, but the letter is just plain silly for an economist of any repute. It is a policy statement that evidence does not support, not to deny that there are evidences of bad regulations etc.
Naked Caps two part series by Rob Parenteau is a good read. Also even someone like economist and pro-market enthusiast Gene Farma has serious questions about the nature of the rules of this market.
Speaking on CNBC at the end last week, Gene”>http://en.wikipedia.org/wiki/Eugene_Fama”>Gene Fama – probably one of the most pro-market economists left standing – pointed out that this view is nonsense. (The”>http://www.cnbc.com/id/15840232/?video=1506628338&play=1″>The clip is here,
Next, you’ll say you feel like you’ve been cricified when you come here.
What? He started it!
kharris, “…….like you’ve been cricified when you come…”
Is that some cross between crucified and criticized? Or, possibly he’s
being circumsized as well in the process.
VTcodger, “…Phil “nation of whiners” Gramm (card carrying fool who managed to get fired by McCain for excessive stupidity),..”
Fool and stupidity are the wrong pejoratives to use in Gramm’s case and probably in general. The situation was not one brought about by stupidity nor ignorance. Gramm walked away with a great deal of money in his personal coffers. How much is difficult to discern as there seems to be a news blackout on his UBS compensation. He received millions in campaign contributions during his Senate tenure. His wife received “just” a couple of million from Enron even prior to the big collapse. And he has been paid in the tens of millions in his position as Co-Chairman at UBS since leaving the Senate. In brief, Gramm and his wife have feathered their own nests while ekplaying key roles in the eventual destruction of our financial system. That’s not stupidity. Many unkind words can be used to describe such behavior starting with personal greed, but a laps of intellect is not among them.